UK consumer credit, mortgage lending post surprise drop in Aug

Monday, 1 Oct 2012 | 4:30 AM ET

SHARES

LONDON, Oct 1 (Reuters) - Lending to Britain's consumers fell unexpectedly in August and mortgage approvals for house purchase were weaker than forecast, data showed on Monday, highlighting consumers' reluctance to take on more debt.

Consumer credit fell by 134 million pounds in August and mortgage lending dropped by 276 million pounds, Bank of England data showed, defying forecasts for increases in both measures.

The drop in mortgage lending was the sharpest since December 2010, while total lending fell by 410 million pounds - the steepest decline since July 2010.

Mortgage approvals numbered 47,665 in August, broadly unchanged from July, against analysts' forecasts for 49,000. The figures reduced chances of a near-term recovery in the housing market.

Before the 2008 financial crisis, monthly mortgage approvals ran at around 90,000, but the number of home sales has slumped since then and the property market has ceased to be a major driver of consumer spending.

Last week similar data from the British Bankers' Association showed a modest pick-up in the number of mortgage approvals in August, though they were still 13 percent down on the year.

The central bank's latest credit conditions survey showed that banks want to make more mortgages available as a result of the Funding for Lending Scheme, which started on Aug. 1 and is aimed at lowering banks' funding costs.

However, the BoE's data showed that effective interest rates rose in August for new secured and unsecured lending to consumers.